Saturday, September 7, 2013

The mainstream media has never told the accurate truth about real estate investment or home ownership in the United States. They did not see the 2007 bubble coming ("What a surprise!") and today in 2013 these same reporters, magazines, websites, government agencies, lobbying groups, and all the other assorted rabble of the real estate industry still can't seem to grasp the reality of the disaster looming in front of them.

The mainstream media loves telling us the housing market has "turned the corner" and prosperity and newly restored vigor and health are here. Look at some recent headlines. Take your pick from this lot.

9.41% is 558% higher than the single family residential mortgage delinquency rate in the same quarter of 2005.

FIVE HUNDRED AND FIFTY EIGHT PERCENT HIGHER.

Look at the Fed's own chart below. Does that line look like a "healthy recovery" to you?

I guess the mainstream media assumes an extremely high delinquency, default, and foreclosure rate is a sign of a healthy and booming real estate market. After all, if people can't afford to pay their mortgages on the properties they currently own we can assume they will quickly go out and buy even larger and more expensive homes, right?

The reality in real estate is much like everything else these days in America.

The poor are also doing okay, at least under their own circumstances. Tons of welfare and social programs and more on the way. In many places someone on welfare can earn more money each day than if they worked at a job. When I visit San Francisco and hear about all the high real estate prices and extreme residential rents, I see a city inhabited by only the very rich and the very poor. The rich pay their own way, the poor live on a wide array of Federal, state, local, and private subsidies and cash handouts. Section 8 and developer proffers for "affordable housing" make living sweet in SF a great deal for some of the city's poor. But average middle class wage earners can forget about buying a home in San Francisco or even leasing an apartment there. Soon add Seattle, Boston, New York, Chicago, and dozens of other cities to this list.

Unfortunately, the middle class is not doing okay. Look at that chart above. Who do you think is delinquent on their mortgages? Millionaires or people on food stamps?

The chart at the top of this post is U.S. income distribution for the year 2010 based on census data.

When you start to realize how much of the country is not rich, you begin to see the social problems looming on the horizon generated by income and real estate inequity.

Of every 10,000 people in the United States, at best 400 have a chance of real financial wealth and retirement security. Yes, this is merely a statistic generalization and some prudent individuals will beat the odds. But the trend lines are there and clear. What do the 9,600 people who won't make it, the 96% of the USA at the bottom, think when someone says the words "The American Dream"?